Reserve Bank of India is not likely to cut key policy rates or cash reserve ratio soon, Om Prakash Bhatt, chairman, State Bank of India, said On Tuesday.
“At the moment, I do not expect. I don’t expect anything right now (either cut in policy rates or CRR). It may still happen, but there is ample liquidity in the system,” Bhatt said.
The SBI chairman was speaking on the sidelines of Vibrant Gujarat Global Investors’ Summit 2009 here.
Bhatt said it is not necessary for RBI to cut rates or CRR only on the monetary policy review day.
“Whenever they (RBI) feel the liquidity is tightening, they may effect these (policy rates, CRR) changes,” Bhatt said.
RBI will go for quarterly review of its monetary policy for 2008-09 on January 27.
Since October, RBI has cut CRR by 400 basis points, Repo Rate by 350 bps and Reverse Repo Rate by 200 bps.
Interest rates
On chances of lending and deposit rates coming down, Bhatt said there is no likelihood of these rates being cut in the immediate future.
“Over a period of time, yes. There is a southward trend in rates (lending and deposit), but whether it will happen in next one-two weeks, I don’t think so or whether next month I cant say,” Bhatt said. Indicating that banks have little flexibility in cutting deposit rates, Bhatt asked, “Will you be happy if (deposit) rates come down?”
The chairman indicated, given the high deposit rates it would be difficult for banks to slash lending rates without hurting margins. Banks are hesitant to cut deposit rates further as they fear that deposit accretion may come down.
“These are very complex things. There has been no change in bank’s credit policy. People themselves are reluctant, it seems, to avail credit as of now,” Bhatt said.
Credit growth, disbursal
SBI is targeting 25 per cent year-on-year credit growth in 2008-09 (April-March) and until now it has maintained credit growth of 25 per cent.
“By the end of this year we expect credit growth of 25 per cent plus year-on-year,” Bhatt said. Credit disbursement this year remained slack until November, but started picking up in December. The bank has disbursed Rs 55,000 crore of loans until now, Bhatt said.
“Credit disbursal was flat till November, but has started picking up in December. Credit disbursal growth is likely to be 25 per cent year-on-year for the year ending March,” Bhatt said. However, Bhatt expressed concern over risk of higher default in small and medium enterprises.
“The biggest problem is in SME sector, especially those which are dependent on exports and on other larger companies,” he said. He however, refused to elaborate on the absolute NPA number.
Satyam and Maytas
Bhatt also reiterated SBI has no exposure to Satyam Computer Services or its promoters in any form.
“We have no exposure to Satyam. We have not given any non-collateralised loan to the promoters of Satyam. That is wrong information, wrong reporting. We have not given anything,” Bhatt said, responding to queries regarding reports that the bank has given Rs 200 crore to Satyam promoters.
He also said the bank had extended loans amounting to less than Rs 500 crore to Maytas group of companies.
“The loans extended to Maytas group were all extended in various phases and are all secured project loans,” Bhatt said.
SBI shares ended at Rs 1,174.90 on National Stock Exchange today, up 1.38 per cent from Monday.
